Restaurant Sales, Optimism Drops

For the first time in six months, the National Restaurant Association’s restaurant performance index sunk last month to a level deemed unhealthy, according to a report released Thursday.

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Index values above 100 indicate a period of expansion, while values below 100 represent a period of contraction. In May, the index dropped 1% to 99.9 from April’s level of 100.3. Softer same-store sales and traffic levels and an erosion of optimism among restaurant operators were to blame, the trade group indicated.

“Like the economy as a whole, the restaurant industry’s recovery hit a speed bump in May,” said Hudson Riehle, a senior vice president at the association, in a statement.

Restaurant-goers spent less while dining out last month. Some 40% of eatery operators reported a decline in same-store sales between May 2010 and May 2011, compared with 31% in April.

Consumers also cut back on the number of times they visited restaurants last month. Forty-one percent of operators said traffic declined between May 2010 and May 2011, a starker drop than the 35% reported in April.

Meanwhile, restaurant operators continued to make capital expenditures. Forty-four percent said they invested in equipment, expansion or remodeling during the past three months, down slightly from 48% who last month reported doing the same. Going forward, 50% of restaurant operators said they plan to make a capital expenditure over the next six months, up slightly from 49% who reported similarly last month.

Even so, restaurant operators are not as optimistic about the future. The index’s measurement of restaurant operators’ six-month outlook in four areas — same-store sales, employees, capital expenditures and business conditions — stood at 100.6 in May, down from a level of 101.5 in April. Further, just 41% of operators said they expect to have higher sales in six months, down from 55% in January. Twenty percent expect their sales volume in six months to be lower, up from a mere 8% in January.

As for the U.S. economy overall, 24% of restaurant operators said they expect conditions to improve in six months, the lowest percentage to say this in more than two years. Twenty-one percent expect economic conditions to worsen.

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